Mercuria Unit to Be Regulated by FCA as JPMorgan Deal NearsAndy Hoffman
Mercuria Energy Group Ltd. said one of its trading units fell under the U.K.’s Financial Conduct Authority for the first time as it seeks to expand services in European financial commodity markets.
Mercuria Europe Trading Ltd. is authorized and regulated by the FCA under the Financial Services and Markets Act 2000, the Geneva-based company said today in an e-mailed statement.
Mercuria, nearing completion of a $3.5 billion deal to buy JPMorgan Chase & Co.’s physical commodity operation, joins Glencore Plc and Trafigura Beheer BV in having part of its business regulated by the FCA. After decades of operating in relative secrecy, the acquisition of physical assets is pushing independent commodity traders to increase disclosure as they seek new sources of financing, including bond sales.
“As Mercuria’s business model continues to evolve to expand its provision of services, so too does the regulatory oversight of Mercuria,” Victoria Attwood Scott, the firm’s head of compliance, said today in an e-mailed statement.
Attwood Scott, a former Goldman Sachs Group Inc. executive, said in April that Mercuria was in discussions with the FCA to determine whether the purchase of JPMorgan’s European gas and power operations would require regulatory oversight by the U.K.
Founded a decade ago by former Goldman Sachs traders Marco Dunand and Daniel Jaeggi, Mercuria is growing faster than Trafigura, Gunvor Group Ltd. and Vitol Group, the world’s largest oil trader. As investment banks such as JPMorgan pull back from physical commodities because of rising regulatory scrutiny, Mercuria is seeking to combine such operations with investment bank-style commodity futures and options trading.
Mercuria’s FCA application isn’t the first by a foreign-based commodity trading firm. A unit of Baar, Switzerland-based Glencore Plc is regulated by the FCA as is the Galena Asset Management Ltd. hedge fund arm of Amsterdam’s Trafigura, and energy and metals trading firms related to Wichita, Kansas-based Koch Industries Inc, according to the FCA website.
The FCA in February issued its first report on commodity-market regulation in the U.K. since 2007. The study raised concerns about the increasing role in global markets played by commodity trading houses and the ability to adequately regulate them.
Non-governmental organizations like Switzerland’s Berne Declaration have said there is a gap in regulatory oversight in relation to traders like Mercuria, which recorded revenue of $112 billion in 2013. The firm and other traders have said their businesses are already subject to regulation through exchange-traded options trading and oversight of their banking partners.
“Mercuria has always been subject to regulations and oversight across the globe in all of its activities and takes these responsibilities very seriously,” Attwood Scott said in the statement. “As such, Mercuria views this development as an extension of its existing obligations and regulatory relationships as we broaden the scope of our business.”